Investors Punish Hedge Funds With Worst Outflow Since '09

Feb 15 2013 | 2:21am ET

Hedge funds suffered their worst outflows in nearly four years in December, with investors pulling more than $20 billion from the industry as 2012 drew to a close.

The huge withdrawals, the highest in 44 months, swamped the modest inflows that hedge funds had seen during the first 11 months of last year. The $20.7 billion net outflow in December left the industry $14.2 billion poorer for the year, according to BarclayHedge and TrimTabs Investment Research.

“Underperformance versus the S&P 500 Index is a likely culprit in last year’s outflows,” BarclayHedge founder Sol Waksman said. “We found that from 2010 through 2012, hedge funds gained 14.1% while the S&P 500 Index rose 27.9%.  That’s a major shift from the trend over the past five years, when hedge funds gained 10.7% while the S&P 500 was essentially flat.”

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